What Tools Should You Use?
As a forex trader, you have a huge array of choices in terms of the tools that you can use to execute your plan. These tools form an intrinsic part of your plan, and you should have a clear idea of which ones you are going to use to achieve your research and trading objectives.
So, as part of the procedure for drawing up a trading plan, you should take a note of all the tools that you will be using as part of your ‘trading desk’, including hardware, software, data and news feeds, and internet access.
In an ideal world, you would only need one of each unique component. However, in the real world, things can fail, and that is the last thing that you need in the heat of the trading moment. Therefore, it is prudent – and very strongly recommended – that you have a backup plan for each of these tools. For example, if your laptop stops working, do you have another computer or device that you can use with the same trading platform and account? Similarly, if the internet connection cuts out, which is a depressingly common problem, do you have a backup in the form of another network you can connect to, or a mobile internet dongle/phone tethering arrangement?
While it’s important to have the right tools at your disposal, you have to be selective, particularly when it comes to things that you have to pay for. In many cases, you can get by just fine with free or cheap trading tools, even though there are countless flashy and expensive alternatives available. Before making any purchase, you should seriously consider whether it would be more advantageous to use the money as trading capital instead – most of the time, it will be.
Perhaps the most important decisions you will have to make with regards to your weapons of choice for trading will be the trading platform and the broker. Although it is true that most trading platforms look pretty much the same, the functionality can vary greatly from one to the other. Currently, the most popular non-proprietary platform is Metatrader 4, which can be used with virtually any broker, and can boast a huge library of scripts for signal generation and auto-trading.
The advantage of using a non-broker dependent platform is that you can switch broker without having to learn a new platform. However, proprietary broker platforms are often a bit easier to use than the ubiquitous MT4, and the web and mobile apps are sometimes a bit better integrated, so it all depends on your priorities.
Choosing a broker is also an important step, and there are many factors to consider. Aside from the reputation of the brand, which is pretty important seeing as you’ll be trusting them with your money, you should look for brokers that offer low spreads and fast execution with low or no slippage. However, you should also consider the tools that they are offering as part of the package, as some may provide useful features such as premium news feeds or advanced technical analysis tools. For more on choosing a broker, check out Wayne Walker’s video guide to choosing a trading partner, which was published recently on Traders DNA.